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Putting in overtime: Mischaracterized workers could get overtime relief

President Barack Obama, waves after signing a Presidential Memorandum directing Labor Secretary Tom Perez to modernize overtime protections, Thursday, March 13, 2014, in the East Room of the White House in Washington. Obama is bypassing Congress and orders changes in overtime rules so employers would required to pay millions more for extra time they put in on the job. (AP Photo/Manuel Balce Ceneta)

Overtime pay — forbidden in many Colorado workplaces — could find its way into the pockets of more Grand Valley residents should federal rule changes directed this month by President Barack Obama take effect.

The rule changes are expected to focus on ways business owners deny overtime pay to workers who would otherwise be entitled to receive it, federal officials said.

The president ordered federal regulators March 13 to update the rules to address “the changing nature of the American workplace” and to simplify overtime requirements “to make them easier to understand and apply,” officials said.

Grand Junction Area Chamber of Commerce CEO Diane Schwenke said the chamber board has not taken a position on either of Obama’s recent proposals to increase the minimum wage or to expand overtime pay.

Because the president is acting by executive order, the process does not invite comment from stakeholders, Schwenke said.

The chamber employs four people who are exempt from being paid overtime based on their duties, starting with Schwenke herself, she said.

The U.S. Chamber of Commerce opposes Obama’s wage and hour proposals, according to the interest group’s website.

Schwenke urged lawmakers to exercise caution in revising overtime rules because every rule change means added costs for small business owners, she said.

Changes to the federal wage and hour rules do not require Colorado to change its rules, but the state could make changes if it wishes and presumably would, said Michael Santo, an attorney with the Grand Junction law firm of Bechtel and Santo who specializes in employment law.

In Colorado, wage and hour laws are enforced by the Colorado Department of Labor and Employment. Minimum Wage Order 30, which helps direct the department in its duties, took effect Jan. 1.

The order establishes the state’s minimum wage of $8 an hour as required under the Colorado Constitution and details overtime pay requirements, Santo said.

Minimum Wage Order 30 requires most business owners to pay employees 1.5 times the normal rate when the employee works more than 40 hours in a week or more than 12 hours in a day.

For example, a hotel desk clerk earning Colorado’s minimum wage of $8 an hour would be entitled to $12 an hour for each hour over 40 in a week or 12 in a day the clerk works.

Some Colorado employers may ignore the rule. Minimum Wage Order 30 provides a list of workers obligated to work overtime without receiving 1.5 times the normal rate of pay.

Colorado ski resorts, for example, are exempted from the law. Resorts can require employees to work more than 40 hours each week without paying the overtime rate, although work beyond 12 hours in a day must be compensated at 1.5 times the normal rate, according to the order.

Auto and farm implement businesses can deny overtime pay to certain employees like mechanics. The same applies for retailers with staff who work on commission, the order states.

As with federal law, executive, administrative and professional employees are all also exempt from overtime pay requirements under Colorado law. To be exempt under these provisions, the worker must meet two tests, Santo said.

Under the first test, the worker must earn a minimum salary of around $24,000 a year. Under the second test, the exempt worker must exercise a certain level of authority or specified duties in order to qualify. Both tests must be met. If they are not, the employee is eligible for overtime pay, he said.

Obama wants to change the way federal law defines these types of exempt employees. Currently, many employees are categorized incorrectly, allowing business owners to withhold overtime pay otherwise due. The problem is not unusual.

The Colorado Department of Labor announced two wage decisions just since January that required business owners to pay hundreds of thousands of dollars of unpaid overtime to workers who were incorrectly categorized as exempt, the department reported.

“The rules are complicated and can be difficult to understand,” Schwenke said.

Obama also wants to increase the minimum salary business owners must pay in order to qualify employees for the exemption, according to the president’s March 13 memorandum.

“I have no inside connection to the Obama administration,” Santos chuckled, “but (the president) apparently wants to double the minimum salary requirement, from what I’m reading.”

If true, the change in federal law would make some workers earning less than about $47,000 eligible for overtime pay.